Will the "Other Shoe" EVER Drop?

[Out of Steam]

It seems to me that you took a loss though, by selling last May. Your AA should reflect your risk tolerance and temperament.

We definitely found out last March that our risk tolerance was less than we thought it was, but were able to wait long enough to recover much of the initial decline.

I'm not inclined to second-guess that decision, or to push too much money back in in the hope of making up for it. Long-term goal will be an allocation of roughly 40%, mainly by reinvesting proceeds from an ESOP in stocks in the next five years.

 

[FREE866]

Figured this was a decent analysis to post here. It's really become glaringly apparent to me over the years that trying to time the market with big swings to cash is just not the way to go.


https://awealthofcommonsense.com/2021/04/what-happens-after-the-stock-market-is-up-big/

 

[frayne]

After listening to Fed. chairman J. Powell on 60 Minutes this evening, doesn't sound like any shoes will be dropping for some time. Stated we are probably looking at 6%+ GDP growth this year as well as unemployment around 2%. Hope he's right !

 

[FREE866]

After listening to Fed. chairman J. Powell on 60 Minutes this evening, doesn't sound like any shoes will be dropping for some time. Stated we are probably looking at 6%+ GDP growth this year as well as unemployment around 2%. Hope he's right !

He didn't say 2%!!!


4-5 %

 

[NW-Bound]

Will the "Other Shoe" EVER Drop?

The following quote is not applicable here, but talking about shoe dropping reminds me of the following interview with Warren Buffett at the early stage of the subprime crisis in Dec 2007.

Becky: We keep hearing all these big companies, like UBS yesterday, coming up with these write-downs, and the market’s starting to look around and say, OK, is this finally it? Is it the last shoe to drop? Is there any way to know when it’s the last shoe to drop?

Buffett: No. No. When people start dropping shoes you really don’t know whether they’re a one-legged guy or a centipede. (Laughs.)

 

[audreyh1]

How many shoes are there anyway?

 

[ejman]

Thinking about that "other shoe" it wasn't the 30% drop that scared me into selling a portion of my stash. I've seen even bigger drops in my investing time (started investing 40 years ago) and didn't panic. It was the "this time it's really different" pandemic end of times thinking that percolated into my consciousness as a real possibility. Now of course I realize that in an end of times situation even cash wouldn't amount to a hill of beans so I'll go back to my usual 50/49/1 with wide rebalance bands and hope for the best.

 

[Golden sunsets]

Not only was Powell bullish in last night's interview, but Yellen feels we will be back to full employment within a short period, I can't recall if she thought we'd reach FE sometime during 2021 or 2022. Probably 2022. Jaime Dimon predicts the surge in GDP will last into 2024.

 

[Bigdawg]

How many shoes are there anyway?

^Gave me a good belly laugh to start the morning. Thanks

 

[NW-Bound]

How many shoes are there anyway?

As Buffett said, as many as there are feet.

Look for the feet!

 

[NW-Bound]

Here's ya go.

 

[Dtail]

How many shoes are there anyway?

It depends.
Imelda Marcos........

 

[dmpi]

Not only was Powell bullish in last night's interview, but Yellen feels we will be back to full employment within a short period, I can't recall if she thought we'd reach FE sometime during 2021 or 2022. Probably 2022. Jaime Dimon predicts the surge in GDP will last into 2024.

Watch out because full employment means no more stimulus.

 

[foxfirev5]

Watch out because full employment means no more stimulus.

I certainly hope so.

 

[DR1959]

Nothing wrong with holding cash.
I used to be 65% in market.
Now I am 50%
I dropped it alot after it came back this fall.
Now I am 50% equity, 10% bonds, 20% real estate and 20% cash.

I am comfortable with 20% cash for multiple reasons.
Last time market took a dive (april 2020), I made some great moves out of cash into stocks and sold that. So my cash is idle now, but it made its yield already, so its not negative. When the other shoe drops and it will, I will put that cash to work again.

Hold your cash, DCA a little, get ready for that shoe to drop.
There are other factors noone mentions, virus comes back, lockdowns, war, natural disasester, president passes away, sheesh, its life and stuff happens.

Be ready!

 

[dmpi]

I am comfortable with 20% cash for multiple reasons.
Last time market took a dive (april 2020), I made some great moves out of cash into stocks and sold that. So my cash is idle now, but it made its yield already, so its not negative. When the other shoe drops and it will, I will put that cash to work again.

Hold your cash, DCA a little, get ready for that shoe to drop.
There are other factors noone mentions, virus comes back, lockdowns, war, natural disasester, president passes away, sheesh, its life and stuff happens.

Be ready!

DCA is easier but it takes a very strong stomach to buy into a recently crashed market. You have to cover your ears because everyone will be telling you that you're making a big mistake.

 

[DR1959]

What I do is double my DCA when market crashes. So if I was doing $50 a week, I would go to $100. I DCA now with certain funds. Stocks, I buy and write covered calls, so if I get caught in a crash, I still get some income out of it. If I get called, I still make money. Anytime you make money its good.

My point was anyone who says you are losing money sitting in a MM or any cash is wrong. You only lose money if it sits there forever, which clearly the OP wasn't planning to do!

 

[Major Tom]

Some people fail to realize that preservation of capital can also be a strategy. If you have won the game, why take the elevated risk?

I get this. However, my way of looking at it is that if you have enough money to be able to forgo high future gains, and can live off a low WR, then you also have enough money to put it all into a good equity fund, and not worry when the market drops precipitously. Which approach you take depends not on your risk tolerance, but on your stomach for volatility (risk and volatility not being the same thing, of course).

 

[jollystomper]

My favorite "waiting for the other (or multiple) shoe(s) to drop" chart:

 

[tulak]

I get this. However, my way of looking at it is that if you have enough money to be able to forgo high future gains, and can live off a low WR, then you also have enough money to put it all into equities and not worry when market drops precipitously. Which approach you take depends not on your risk tolerance, but on your stomach for volatility (risk and volatility not being the same thing, of course).

That’s my take too. I maintain a variable AA. I have a fixed amount in FI and the rest goes into equities.

 

[unclemick]

Grin. My parents passed with the other shoe still in mid air! Out of high school in the 1930's they suffered in 'The Great Depression' til about 1940. Went the rest of their lives waiting - all the while 'enduring' a rising standard of living. For which I am grateful.

Heh heh heh - first stock Hyatt Hotels 1966 and remember well 'the Dow will NEVER break 1000.' So you better have some rentals, raw land, gold coins, etc., etc.. Born again 60/40 from late 20's till age 62. Now roughly 60/40 the other way at 77.

 

[Markola]

Will the "Other Shoe" EVER Drop?

Grin. My parents passed with the other shoe still in mid air! Out of high school in the 1930's they suffered in 'The Great Depression' til about 1940. Went the rest of their lives waiting - all the while 'enduring' a rising standard of living. For which I am grateful.

Heh heh heh - first stock Hyatt Hotels 1966 and remember well 'the Dow will NEVER break 1000.' So you better have some rentals, raw land, gold coins, etc., etc..[emoji57] Born again 60/40 from late 20's till age 62. Now roughly 60/40 the other way at 77.

Well, you saw interesting times with shoes dropping as an investor yourself, from the 60s-80s. I started the fun the early 90s.

 

[frayne]

He didn't say 2%!!!


4-5 %

I stand corrected !

 

[bclover]

How many shoes are there anyway?

aww darn it, that was my line.

lol op, if I knew the answer to that I'd be sunning on a greek island watching my very expensive yacht bob up and down while a handsome Greek cabana boy fed me.

trying to time the market can be cause severe migraines, get a nice AA set it, check it a few times a year and enjoy your retirement.

 

[gman1234]

I personally think you should be careful. I sold a business and went 'all in' in 2003 in equities. First time I've ever sold (other than for expenses) was recently. Why?

- COVID. I don't think the damage from COVID has fully manifested itself. Rent moratoriums are ending (and the few Mortgage moratoriums). Some States are still closed down so more businesses will not survive. And there is even talk of another 'wave' in the fall.

- Corporate Taxes are going up. I don't care if corporations 'eat it' or they pass it on (reducing demand) - either way it reduces the profit of a company - which is what stocks are all about.

- Social Unrest. It doesn't matter who or why but unending riots don't help the anybody and I see no end in site.

- Government spending is out of control. I know it has been for a long time but maybe inflation will come back big time.

Of course, massive Government spending may keep things afloat for a long time and stocks will boom!

Greg